‘Who knows if it will survive’: Experts question how long Trump’s Venezuela oil deal will last
One person described Trump’s promise of billions of barrels of Venezuelan oil reserves as “aspirational.”
Venezuela’s interim President Delcy Rodriguez looks on during a signing of an agreement ceremony between Chevron Venezuela and the national government at the Miraflores Palace in Caracas on April 13.Juan Barreto/AFP via Getty Images
“They appear to be either [undeveloped] sites that have no electricity or infrastructure, or they are fields that are deemed to be mature and not something a company like ours would find attractive for further investment,” said this person, who was granted anonymity to discuss the administration’s plans.
“If the administration has in fact done this [deal], and the U.S. has rights to 65 billion barrels of Venezuelan crude, that’s a good thing, that’s historic, that’s laudable,” this person said. “But it’s not really impactful in the short term or anything other than aspiration.”
Industry executives are also raising issues ranging from the quality of the oil fields Venezuela offered for the venture, the amount of time and money needed to get oil flowing in a country that recently suffered a massive earthquake and whether the deal itself was actually legal.
The timeline for the deal also appears to be in question. The White House fact sheet lists the Venezuelan government as offering 100 years of access to the oil fields. Venezuelan interim President Delcy Rodríguez, however, said the leases would last 25 years.
Details like that — and how exactly the Pentagon would make the investment — still seem fluid, said Jim Reardon, who co-leads the Venezuela practice at law firm Nelson Mullins. Trump’s assertion that the United States would take 20 percent of the crude oil produced to put into the Strategic Petroleum Reserve — something analysts said would be technically unlikely, given the chemical mismatch between sludgy Venezuelan crude and the type the SPR is meant to hold — could also scare away any other potential investors in the project, Reardon said.
“Trump is going to take 20 percent of production for the SPR, so right there you’re paying a gross 20 percent royalty to the U.S. government,” he said. “Then you’ll have to pay something to the Venezuelan government. Are you going to make any profit at the end of the day? Who’s going to take the risk?”
The deal has drawn measured praise from some involved in the investment push in Venezuela.
Joseph Hernandez, the CEO of Blue Water Acquisition Corp. IV, which is exploring oil investments in the country, said a deal with the backing of the U.S. government could “give other investors confidence to follow.”
But Venezuelans “must participate in the upside,” rather than allowing companies to extract resources and take profits overseas, Hernandez said. “Done responsibly, private capital doesn’t weaken Venezuela — it strengthens the country, expands opportunity and helps Venezuelans rebuild their economy.”
The partnership, if successful, would kick-start oil production in Venezuela, something President Donald Trump has wanted since his administration plucked Venezuelan President Nicolás Maduro from power in January. Trumpand the GOP are promoting increased imports of Venezuelan crude into the United States as a possible balm for the high fuel prices that have plagued voters since the U.S. launched its attacks against Iran in late February.
Oil executives are warning, however, that the fields targeted for production will take years to develop and expressed little confidence that the deal the White House announced with a company few are familiar with would lead to much.
“Fuck all, what is this?” said an executive at one oil company granted anonymity to speak frankly about the administration’s plans. “This thing is way too big for a company with no capabilities and no credibility.”
Some in Caracas, too, said the Trump administration’s support should extend to a wider range of firms, especially smaller operators.
“Investing in one company could be a starting point, but I think it needs a bigger approach,” said Alejandro Sucre, a Caracas-based investor who is pitching a fund backing oil and mining projects in Venezuela. “You’re not going to give 65 billion barrels of reserves to one company, right? That doesn’t make any sense.”
It’s not just industry officials expressing doubt. Giving the U.S. ownership of an asset seen as a national treasure is already drawing heat from across the political spectrum, according to Liliana Diaz, a senior fellow at the Atlantic Council Global Energy Center.
“The criticism is arriving from opposite directions,” Diaz said. ”Hardliners object on sovereignty over the resource. The opposition objects on constitutional legitimacy. Something attacked from both flanks at once tends not to last, whatever its economics.”
NABEP has become one of the largest private operators in Venezuela in recent years. The agreement gives the Barbados-based company the right to develop 65 billion barrels of crude across 17 Venezuelan fields and includes a near-term goal of increasing production to more than 1 million barrels a day.